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Why Term Insurance Claims Gets Rejected

A term insurance claim is an end process of a term insurance policy plan, where the claim is filed by the policy beneficiary in the insurance company to avail the death benefit when the insured suffered an untimely demise. There is a procedural track to every term policy that has to be followed by policyholders, and if they may trip somewhere, they are liable to rejections.

What is a Claim Settlement Process for Term Insurance?

Claim settlement process for term insurance is carried out in three different stages. These stages include intimation of claims, assessment of claims, and decision for claims. All three stages are briefed as follows:

  • Claim Intimation

    The beneficiary or the nominee gives intimation to the insurance company with a death certificate and the essential policy documents as per the company's rules. These procedural requirements are to be done within 90 days, from the demise of the policyholder.

  • Claim Settlement

    Every company has a claim team, which exclusively looks into the documentation requirements, check for pending requirements as it has to be communicated to the claim beneficiaries.

  • Claim Decision

    This is the final stage of the claim's approval and also, where there are high chances of a claim being rejected. In the case of approval, the claim is settled to the beneficiary’s account through NEFT.

Documents Required for Establishing the Death Claim

To establish the death claim, the following documents must be submitted to the insurer:

  • An original policy document.
  • Death certificate as released by the authority of the insured
  • If needed, a Post- mortem report or an Autopsy report
  • Duly completed claim forms
  • A duly attested certificate from the attended hospital, so that cause of death can be maintained wherever applicable

Reasons for the Claim Rejection:

A term insurance claim is an amount to be paid by the insurance company. Thus, to avoid any discrepancies or false claims, the company ensures that all plausible loops are checked. They can reject any claim that stands in opposition to their stated policies because they are liable to pay hefty amounts. Opting for insurance by an individual has the primary focus to provide a security net to the family in case there is an emergency so that they can ensure their financial needs against odds. The Insurance Research and the Development Authority releases data on rejected claims, which rounds about 12,000-13,000 each year.

Here are some reasons why an insurance claim can get rejected:

  • When an Individual Provides Unsubstantiated Information

    In the policy dynamics, when such a large financial amount is as a stake, the onus of knowing and telling each detail is on the policyholder. Filing for term insurance is a hefty and time taking process, and many policy seekers, to save time, tend to hide or manipulate real information. While applying for the claim, one should submit the actual information, which is to the point and accurate to the insurance provider. Most of the time, the discrepancy involved in is that of some vital information like age, income, or health history. The company asks for these details to ensure transparency between both parties involved. At the same time, make sure to fill correct policy details and in the manner asked. The claim gets rejected at the time of claim assessment due to a lack of relevant information.

  • When the Policy Documents are not Read Properly?

    While filling the proposal form, one is required to read the policy brochure carefully. Such documents often involve a long read; to avoid that, people prefer an agent and let him take the call, which should ideally be done and decided by them. The process is indeed cumbersome, but that doesn't mean it can be handled callously. These documents ultimately decide the financial future of the family of the insured. Thus, a third person like the agent shouldn't be trusted. These forms require some details, like the members' health history and, in his urgency, to let go of some vital details. This is how a claim can get rejected as information provided stands compromised as per the policy details.

  • Unspecified Nature of the Job:

    There are high-risk jobs as per the policy plans of the various insurance companies, as not everyone can do a desk or low-risk jobs. Those involved in the hazardous sector or the mining sector are involved in life-threatening activities. Thus many insurance companies abstain from including them in the risk claim. Thus, the nature of the job must be communicated to the insurance provider. If the details do not match, or there is death due to the risk involved, the company can reject the claim.

  • Undisclosed Medical History

    The medical history of the policyholder helps the company to chart the would-be future of the person buying the policy. In the form, it is always a significant section that should be dealt with wisely without holding up any important information. One might escape the scrutiny in the first part, but it will be scanned enough at the time of the claim. Thus, in case of a mismatch, the claim gets rejected.

  • Avoiding the Medical Test

    There are different rules as per the sum involved. If the insured opts for the higher sum, then it becomes essential to undergo a medical test. But, if an individual fails to do so, it is highly likely that his claim will get rejected.

  • An Already Existing Insurance Policy

    Disclosing an existing policy is essential as companies are particular about this rule, and they have enough agencies to cross-check. At times people miss out on this detail on purpose, or they do it unknowingly as they fail to give the document a quality read. When such detail comes to the fore, the insurance claim stands rejected.

  • Due to a Policy Lapse

    This is the biggest threat to any insurance claim, and it means that policy has lost the relevancy on the paper. It usually happens when one fails to pay the premium on time, as it is the major maintenance of the bought insurance policy. There is a grace period provided even after the due date is missed by the insured. At the same time, one should be mindful of the renewal of the policy as to when it is not done; the claim stands automatically rejected. Thus, to avoid this, it is imperative that the policy buyer put these urgencies on a loop.

    A term insurance policy is a financial wizard to a policyholder and his family. It acts as a guard to all odds which our life hides in the offer, and when such an event happens, there is great support at the back of the stranded family. Thus, the policy documents must be taken seriously with ample care. 

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